Comments on: Philip Pilkington: The New York Times’ Bizarre and Misleading Praise of Austerity Poster Child Latviahttp://www.nakedcapitalism.com/2013/01/philip-pilkington-the-new-york-times-bizarre-and-misleading-praise-of-austerity-poster-child-latvia.html
Fearless commentary on finance, economics, politics and powerFri, 09 Dec 2016 15:33:23 +0000hourly1https://wordpress.org/?v=4.4.5By: E.L. Beckhttp://www.nakedcapitalism.com/2013/01/philip-pilkington-the-new-york-times-bizarre-and-misleading-praise-of-austerity-poster-child-latvia.html#comment-1002732
Fri, 04 Jan 2013 17:54:11 +0000http://www.nakedcapitalism.com/?p=37055#comment-1002732Not so bizarre, when one considers NYT’s growing presence of corporatist dirt on its knees.
]]>By: edgarhttp://www.nakedcapitalism.com/2013/01/philip-pilkington-the-new-york-times-bizarre-and-misleading-praise-of-austerity-poster-child-latvia.html#comment-1002602
Fri, 04 Jan 2013 17:07:16 +0000http://www.nakedcapitalism.com/?p=37055#comment-1002602Hmmm…http://epp.eurostat.ec.europa.eu/tgm/table.do?tab=table&init=1&language=en&pcode=tec00001&plugin=1
]]>By: coobekhttp://www.nakedcapitalism.com/2013/01/philip-pilkington-the-new-york-times-bizarre-and-misleading-praise-of-austerity-poster-child-latvia.html#comment-1002006
Fri, 04 Jan 2013 09:52:19 +0000http://www.nakedcapitalism.com/?p=37055#comment-1002006I am from Poland (Latvia’s close neighbour and a country that is also in a group of Emerging Europe (EE) and share the same traits to Latvia and other EE countries). Although I have generally progressive world view I almost fully agree with comments by ‘Latvian’. Touching few points below.

Emigration. All the countries in EE ‘suffered’ the emigration after the joining EU and esspecially after 2 year grace period of free-flow of labour. Poland with it’s population 38M for example had roughly 2M emigrants, most of them to UK & Ireland. Interestingly enough at the same time the work migration to US almost halted. I’d like to think that EE countries could make such policies that those emigrants wouldn’t migrate and stay with their family & friends. But the truth is that if you were a doctor in Poland earning $800 per month and you could earn 10x as much somwehere else adding all the blessings of cheap airlines connections sprouting everywhere, it was no brainer. Same for most of the young people who could get a jobs after University for $500-$600, if the could get one at all as the Unemployment was rather high. Polish economy was just not developed enough to provide work for all the new graduates and esspecialy work that was aligned to their skill set and provided the way of life they wanted. I think with exceptions to some countries like Slovenia and maybe Czech Republic this EE pattern was universal and had nothing to do with specific policies but was structural & economic in its nature. Now after all the years of EU structural funds flowing to us it has changed, we are really in far diffrerent position now than in 2004. I saw somewhere on this site sombody mocking the Nobel Prize for EU, I would be the first one to defend it.

Latvia. Being an economist & working in finance I was amazed at how quickly Baltic Trio, Latvia included, was growing for couple of years it was GDP % change that dwarved even China. All the neoliberals in Poland were atributing it to flat taxes and lax labour laws (as always by the way). I went for a holiday in Baltics on a cold May of 2007 :). I was suprised at the cost of living there and of the apartment costs in Riga (Latvian capital) as how quickly it was being renovated, very beutiful city by the way, and the lavishness of the summer houses in Jurmala and the cars that roamed the streets not to be seen in say Gdansk Poland at that time. It struck me that we did not see such a huge development in Poland but at that time I did not connect it to our quite conservative monetary policy and it seems quite lax one in Latvia. We were at best growing 6% and 4-5% on average. But at the end we did not experience such a huge property correction nor unemployment. I do think ‘Latvian’ is correct with stating that those were absolutely stellar (negative) years from economic sensibility perspective, probably driven by credit flow from Swedish banks if I am not mistaken.

So Latvia did embark on a 2nd so called shocked therapy which Poland did only once in ’89 after the Soviet bloc collapsed. Hopefully we had less Bentleys on the streets through all those years but more sensible Central Bankers. Coming back to Latvia I think you can do as they did – adjust quickly – and granted its far away from reaching the GDP of 2008 (since it was artificaily fueled) or do as Spain and Greece is doing and prelong the pain. Being fair to Greece and Spain of course they are in ill designed euro-zone with EU authorities and politicians unable to act quickly,sensibly, reasonably and with a tint of solidarity. This is tragedy of those countries in far higher extent then their own local policies I presume. But again if I were in a country I would much rather prefer quick shock therapy and than growth, slower ableit one, than ever creeping gloom.

]]>By: mike cobblerhttp://www.nakedcapitalism.com/2013/01/philip-pilkington-the-new-york-times-bizarre-and-misleading-praise-of-austerity-poster-child-latvia.html#comment-1001886
Fri, 04 Jan 2013 08:34:05 +0000http://www.nakedcapitalism.com/?p=37055#comment-1001886I am Latvian. This is the best government that we have ever had, even though it could be much better still. They are missing on a very strong opportunity which is good political and trade relationships with Russia. The New year TV address of the Prime Minister perfectly demonstartes the unwillingness to accept the realities of the country’s geographic positioning. It’s too early to talk about success. Such talks are very annoying for the poor families in Latvia for whom 5% growth changes nothing.
]]>By: Latvianhttp://www.nakedcapitalism.com/2013/01/philip-pilkington-the-new-york-times-bizarre-and-misleading-praise-of-austerity-poster-child-latvia.html#comment-1001333
Fri, 04 Jan 2013 00:23:02 +0000http://www.nakedcapitalism.com/?p=37055#comment-1001333Fantastisks komentārs! Cepuri nost! Respekt i uvazhuha!
]]>By: John Sullyhttp://www.nakedcapitalism.com/2013/01/philip-pilkington-the-new-york-times-bizarre-and-misleading-praise-of-austerity-poster-child-latvia.html#comment-1000789
Thu, 03 Jan 2013 18:48:14 +0000http://www.nakedcapitalism.com/?p=37055#comment-1000789He was an architect prior to losing his business. He is also the guy who reopened his business. On thing Mr. Pilkington did not point out here is the large cuts in wages (Krugman’s “internal devaluation”) which have made Latvian exports more competitive. The article in the NYT points to a company which slashed wages by 30%, which is absolutely brutal.

The NYT article points to a rather grim situation in Latvia. Hardly a shining success story.

]]>By: Mickhttp://www.nakedcapitalism.com/2013/01/philip-pilkington-the-new-york-times-bizarre-and-misleading-praise-of-austerity-poster-child-latvia.html#comment-1000582
Thu, 03 Jan 2013 17:01:07 +0000http://www.nakedcapitalism.com/?p=37055#comment-1000582If France, Italy, Spain and the US lower wages and increase productivity, where on earth are we going to find the markets for decreased demand and increased supply? This is a back-ending of value chains where the most profittable part of the chain is sacrificed by impoverishing the most productive. How exactly do you expect corporations to respond to the collapse in demand and value? By hiring the fantastically cheap labour that results? Governments and business have to be prepared to go down with the ship.
]]>By: Latvianhttp://www.nakedcapitalism.com/2013/01/philip-pilkington-the-new-york-times-bizarre-and-misleading-praise-of-austerity-poster-child-latvia.html#comment-1000568
Thu, 03 Jan 2013 16:54:49 +0000http://www.nakedcapitalism.com/?p=37055#comment-1000568How can you get out of muddy hole, with digging it bigger? I do not understand, what plan has Greece and other countries. They are all overpaid! As Latvian in Latvia, I feel now much better then back in 2005-2006, when the times for Latvia economy were considered great. That is what matters! You speak about poor in Latvia. Try to find a decent employee! If you are ok with your head, you have no problem to find a job in Latvia. Those who have highest education, normally have at least several offers, if they are in search of a job. Jobless are only those who better prefer to live on the government’s niko or those who are employed illegally.

This article and others speak about terrible drop of GDP, but who has actually looked at, what were the growth rates before crisis? For four years they were growing with rate of 10% and above. Is that normal development? Every single idiot could open a firm and run it. In those conditions it was impossible to fail. To earn, you needed no brain in Latvia. As an employer I could not find new workers to substitute those, who left. In 2006 and 2007, in both years I had to increase wages from 20% to 30% to keep the work force. Is that normal? My employees were buying cars that costed twice as much as mine!!!! That was the problem – everyone in little Latvia wanted to live the American dream in a very short time. The crisis put everything in its places. The 20% drop in GDP first of all, was a leveling out of our economy after disbalanced growth during 2004, 2006, 2005, 2007. This is something that every one, including the Nobel praised Krugman, is failing to see.

Then, concerning departing Latvians. During the Sovient regime none could travel, none could move and live elsewhere. Life sucked big time! After Latvia break away from Russians, everyone wanted to live in a Hollywood movie. I remember my self back in 1997, when I entered University – I was 100% sure that first thing I do, after I get my degree, I move away from this little depressing country. The only thing, what kept me here in Latvia, was a lack of courage and then, at that time, not that good English. Keep in mind that Latvia was poorer then any single country in the left from our border. When back on 1990somthing, Latvians were allowed to travle to EU with no visa, many fled our country. When we joined the EU back in 2004. Latvians were allowed to work in EU countries legaly. Again many fled the country. And than after 4 years we got hit by crises and again some 5% fled from Latvia. So what is a big deal. When Latvia will becom a better place to live, some of the fled Latvians will return as well as people from other countries will view Latvia as a possible place to live. It is a free market, we are living in. Those who thing, it is better to live elswhere, they do so. When the time will come, there will be people, who would prefer to live in Latvia.

As a Latvian I am proud to live here and I am proud what Latvia and its government did. We have a stable and growing economy now, while other countries in EU are falling. More there are countries as Greece, which hesitate to put their fiances back where they should be, the better for Latvia and Latvians it is.

I am also Latvian and remember such things as complete lies to the world about growth in so called over-heated period – when Gov of LV put social budget into main budget, when LV started building of most expensive bridge in the world, and also most expensive library in the world. When ignored any advises from world bank and other organizations and even countries who same time managed to save money reserves for crisis that later came. Read about Latvia’s crisis in Wikipedia – unemployment, GDP drop year by year in 2008 and 2009, inflation figures, current account figures etc. Or read Krugman’s blog about “success story of Latvia”. Also I do remember “maximum speed” economic politically driven psychology with impossible greed of government workers probably alike Wondermondo (who claims to have been working in gov sector before had to move to private sector) who same time covered themselves with smart employment agreements that granted security from being fired or salary reduced. Who didnt somehow see how banks were “raping” Latvians leaving crediting without any control, when You could borrow 50 times more than you could ever return. And that happened because from one side there were unprepared for such boost post-soviet-union-living people and from other hand politicians were promising “7 years of economic boost and happiness”. Something similar to Greece gov guys..

Saying that “cuts were addressing to increase competitiveness” is just bulls**t, cuts were addressed to teachers, policemen, social unprotected people including pensioners, gov low level employees who werent protected by these smart security employment agreements. They simply took away unemployment social security, so called “mother’s payments”. The state institutions werent reformed or eliminated, they just changed their names, united several of them into one, released small amount of people which in fact gave small result – those high level managers with up to 10 times bigger salaries remained untouched. You could also see biggest data leakage facts from Latvia’s history when so called hacker NEO published these reports. I am pretty sure this positive thinking Wondermondo was one of them who were published. Otherwise I dont understand motivation of lies published in his comment.

Next – of course people started to travel around, study and work in EU after Schengen Area opened but political corruption and unfair attitude increased emigration dramatically. Now these are more than 300K Latvian people living and working for other countries. If my colleague Latvian cant combine emigration figures with our government’s attitude before, during the crisis and “so called after crisis despite it continues” then I am sorry about him/her. One more thing – demography. There are even estimates that after 20 years Latvians will loose their country as rates are growing with minus. And that again is related to one of the unfriendliest places for business from tax pressure to entrepreneurs / businesses in the world.

People of course massively re-register themselves from employees to micro-enterprises since that makes less payment in taxes and that is probably mentioned by Wondermondo “an increase of newly registered enterprises”.

The truth is that people don’t believe their government, politicians any more. People who stole country are still free, courts delay any movement with main cases that would increase belief, patriotism to stay in their country. Person who is responsible for biggest bank affair (Parex) is sitting in EU Parliament. What can You say more? People dont believe they will get their pensions at all during their lifetime. Social systems are not getting better. Austerity in reality is put on lower class people, rich still drive their extra expensive cars, win gov purchase tenders and reforms happen slowly.

I do agree that austerity was necessary after living in fairy tale otherwise country would default and that would be worst scenario ever. However luxury taxes, real estate taxes, royalties from rich people savings and many other logical things werent implemented and some of them arent implemented even now and austerity touched the unprotected part of LV people, in most of the cases people had no savings at all if anyone from USA or Western Europe understands what means “not to have any savings at all”. So

I find that New York Times article is complete PR for IMF. And do agree that Latvia is not a success story at all.

]]>By: Rasmus Xerahttp://www.nakedcapitalism.com/2013/01/philip-pilkington-the-new-york-times-bizarre-and-misleading-praise-of-austerity-poster-child-latvia.html#comment-1000532
Thu, 03 Jan 2013 16:39:53 +0000http://www.nakedcapitalism.com/?p=37055#comment-1000532Ah, but don’t you see – having the highest Gini coefficient among all EU countries is the very definition of a ‘success story’ to many.

For what it’s worth, I do feel bad for the Latvian above who seems to have taken this article as a slight against Latvia, rather than one against austerity and similar economic measures. Do not worry, friend. Latvia still has quite a ways to go before reaching the US in its level of income inequality.